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There are many ways of saving for your retirement; a tax-efficient way is to invest in a pension. Pensions allow you to save during your working life to provide you with an income in retirement.
From 6 April, one of the biggest changes to pensions is taking place:
Greater access to your pension savings from the age of 55
Freedom to take unlimited lump sums or income from your pension.
Greater flexibility over what you can do with your pension pot making investing in a pension even more attractive.
If you are looking to take the DIY approach to investing for your retirement, we offer a Self-Invested Personal Pension (SIPP) that will put you in control.
Read our Pension guide.
Find out about the new Greater Pension Flexibility.
A SIPP is a type of personal pension and works in a similar way to a standard personal
pension. The main difference is that a SIPP offers more flexibility and a wider choice of investment types rather than limited to funds.
With the TD SIPP, you can create your own personal retirement strategy by choosing
from our full range of investment options: UK & international equities, investment
trusts, Funds (unit trusts & OEICs), REITS and Exchange Traded Funds (ETFs). Through
our easy-to-use online platform you can trade in and monitor your portfolio, and
there's no initial set-up fee.
Launch our Pension Calculator.
The investments made within a pension can fall as well as rise and you may end up with a fund at retirement that’s worth less than you invested. You can normally only access the money from age 55. Prior to making any decision about the suitability of a pension to meet your retirement needs, we recommend that you seek the advice of a suitably qualified financial adviser. TD Direct Investing does not provide investment advice. The tax treatment of this product depends on your individual circumstances and may change in the future.
Deciding which pension is right for you can often be confusing. To help you understand the pension options available and whether a SIPP might be right for you, here are details of other pensions on the market.
You contribute to the state pension through your national insurance contributions. When you reach the state retirement age, you'll receive a weekly income from the government based on the contributions you’ve paid. For most people, this weekly amount won't be enough to live the lifestyle they've become accustomed to in retirement so additional income will be needed.
An occupational or company pension is a scheme offered by an employer to provide pensions for its employees. You don’t have to join but in many cases you'd be foolish not to as most companies make contributions on behalf of their employees – often matching the contributions the employee makes or providing a percentage of the employee’s salary. If you're employed, you'll automatically be enrolled into your employer’s pension scheme at some time before 2016. You have the option to opt-out of the scheme but if you do, you'll lose your entitlement to your employer's contributions.
The most generous company pension schemes are defined benefit schemes (also known as final salary). They guarantee to pay out a certain level of income based on the number of years you work for the company and your career average or final salary. They used to be commonplace but are increasingly only found in the public sector. The greater pension flexibility available through pensions such as SIPP will not apply to defined benefit schemes.
It's more common now for an employer to offer a defined contribution scheme where contributions are invested on your behalf so that when you reach retirement a capital amount will be available to provide your pension. The amount you get at retirement will depend on how well these investments perform and are not guaranteed.
A stakeholder pension is a form of personal pension that allows you to pay regular or lump sum contributions which are then invested. The amount you get at retirement will depend on how much you pay in, how well the investments perform and how much you decide to draw from your pension fund each year when you retire. Stakeholder pensions are typically offered by insurance companies, have low costs and a limited investment range. TD Direct Investing does not offer a stakeholder pension.
A personal pension is another form of pension that allows you to pay regular or lump sum contributions which are then invested. The amount you get at retirement will also depend on how much you pay in, how well the investments perform and how much you decide to draw from your pension fund each year when you retire. Personal pensions also tend to be offered by insurance companies with investment choices limited to the insurance company’s own funds. In some cases, insurers have now extended the range of funds available to include those of external fund managers. TD Direct Investing does not offer a standard personal pension.
Find out about the new Pension Wise Service
A detailed guide to the UK pension changes from 6th April 2015.
Next: Choose us for SIPP